Kerry Group's Five Year Plan To Rely On Acquisitions

Food, ingredients and nutrition company Kerry Group is expected to focus strongly on further acquisitions in order to achieve its annual growth targets over the next five years, according to the Irish Examiner.

Starting in 2018, the group’s CEO Edmond Scanlon set an ambitious growth target of 10% (including adjusted earnings per share) each year for the next five years.

This marks the first year of the group’s new strategy, with its core taste and ingredients divisions being key to achieving these targets.

However, the Tralee-based company previously changed its 2017 earnings growth targets, settling at between 4%-6%, i.e. to between 336c and 343c per share.

The company is anticipated to meet those targets when it publishes its 2017 later this month. At the end of last year, it posted a 4.2% increase in business volumes in the first nine months of 2017, with 'strong business momentum' in Q3.

Growth Potential

“Across the ingredients sector, we believe that Kerry Group has the greatest potential for earnings growth over the medium-term,” said Davy analysts Liz Coen and Katy Hutchinson.

“The group has the dual organic growth levers of volume and margin advancement," Coen and Hutchinson continued. "It also has ample balance sheet capacity to expand through merger and acquisition. The group continues to be highly cash generative with the potential to generate over €800m in free cash flow — before dividends and acquisitions — over the next two years."

"In 2017, Kerry stepped up its expansion through merger and acquisition, announcing seven bolt-on acquisitions, for a total consideration of €420m, in developed and developing markets," they said. "We expect further M&A activity in 2018.”

The group recently said it had several acquisition opportunities, in particular in Asia, and that it could spend as much as €1 billion over the next 18 months.